Hi all Be grateful for a quick bit of advice in regards to a new van purchased for £14,735. I've entered my Asset depreciation section on my book keeping software (Clearbooks) and am presented with the following: Depreciation Method: Straight Line or Reducing Balance (Which is best to select) Depreciation Rate: XX % (This is updated automatically when I set the Economic Life) Economic Life (years): X (I have no idea how long it will last? What should I enter here?) Depreciation Account: I assume I select "Motor Vehicles Dep" Accumulated Depreciation: 0.00 (What should go here?) Accumulated Depreciation Account: I assume I select "Motor Vehicles Acc Dep" here Many thanks for any help/advice...
I do not know Clearbooks but this seems a bit of an overkill. Do you care to have depreciation in your bookkeeping records or would you be happy to let your accountant do it at the end of the year? I would say that only 1 in 100 of my clients prepare there own depreciation. If you do want to do it then for Motor vehicles I and most other accountants depreciate them at 25% reducing balance. For tax purposes depending on if you have bought any other assets in the year you will probably be entitled to have all of the £14,735 reduce your profit in the year of purchase.
Hi Thorpes - thanks for your reply. Guess I am one of the 1 in 100 clients then! How do I go about filling in the economic life of the van?! Thanks again, Adam
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Economic Useful Life of a van? How long is a peice of string? Your guess is as good as any. I see some bans battered about and relatively useless after 2-3 years where others that are carefully looked after can last 15-20 years. If you can play around with the years so that the depreciation rate on a reducing balance basis is around 25% then book value should never be to far away from its actual value.